1 We examined the extent to which the Department secured value for money and achieved their objectives for the Defence Fixed Telecommunications System project.
2 We used an issue analysis approach to designing the scope and nature of evidence required to complete the examination. That is, we set a series of high-level audit questions that we considered it would be necessary to answer in order to assess the value for money of the deal, and collected evidence accordingly. For each top level question, we set a subsidiary group of questions, linked logically to the main question, in order to direct our detailed work and analysis.
3 The top level questions we set were:
■ whether the objectives for the project were clear and valid for a privately financed project, in particular whether the Department set a specification for the project which would maximise the opportunities for promoting value for money;
■ whether the proper Private Finance Initiative processes were well-executed;
■ whether the best deal was obtained in all the circumstances;
■ whether it was sensible for the Department to proceed with the selected bid; and
■ whether the value for money of the deal has changed since contract signature.
4 Our main evidence came from examination of the Department's files, interviews with key staff at the Department, and discussions with other parties involved in the project such as the bidders and the Department's legal advisors. We also analysed the financial modelling undertaken by the Department in their assessment of the bids. We appointed Mason Communications and Taylor Barton Taylor to provide technical and financial advice, specifically in the area of telecommunications. We also commissioned Charles Russell Solicitors to provide legal advice on the contract terms.
5 Our consultants considered a wide range of telecommunications outsourcing contracts, including other Ministry of Defence communications contracts. The contracts ranged up to hundreds of millions of pounds and covered central and local government as well as major multinational private organisations. Those contracts that were used directly for benchmarking were signed between May 1997 and October 1998. While it is not possible to find comparator contracts which exactly replicate the scale and features of the Department's fixed telecommunications contract, the contracts examined by our consultants have, nevertheless, sufficiently comparable features to enable useful comparisons to be made. In addition, we were able to make comparisons with other private finance initiative contracts we have examined, including contracts in the information technology sector.